Ready for the Mother Of All Bailouts?

The FHA is on the hook for lots of "underwater" loans, taken out by low-income homeowners who got special low down-payment deals and -- in case you didn't notice -- unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year. Dave Hogberg of Investors Business Daily reports:

FHA-insured loans have more than tripled from 530,000 in fiscal year 2007 to 1.7 million thus far in 2009. The Government National Mortgage Association, which securitizes FHA loans, has boosted its mortgage-related issuance to $287 billion from $85 billion. Yet during that same period, the FHA's loan delinquency rate has climbed to 14.4% in Q2 from 12.6% two years earlier.

OK, so guess what the consequences are now?

As job losses continue to mount, why would someone facing economic difficulties try to keep a home that is worth less than the money owed on it?

More at the Hot Air Green Room.

UPDATE: Welcome, Instapundit readers! This story has now been front-paged at Hot Air -- thanks, Ed Morrisey!

UPDATE II: Proving that some bloggers know more about economics than Tim Geithner and Ben Bernanke, Jimmie Bise explains this predictable disaster in four sentences:

See, it turns out that the FHA, prompted of course by Congress, gave out a bazillion loans to people who were on the very edge of being able to pay them back. As long as our economy kept booming, they'd probably -- probably -- be okay. But if the economy wavered even a little bit, they'd be hosed and all those loans would come back to the FHA so fast you'd think they were attached by rubber bands. That's exactly what's happening now and the FHA is watching their cash reserves dry up like a shallow mudpuddle in the middle of Death Valley in July.

Or, in three simple words: IT WON'T WORK!